Shoprite, Steinhoff marriage talks continue

Listed retail giants Shoprite and Steinhoff say they continue to have exclusive talks about a possible merger.

 The companies said they “remain engaged in exclusive on-going negotiations regarding the potential sale of Steinhoff’s Africa retail assets to Shoprite”.

This follows an announcement in December that the companies were planning on creating an entity to be called Retail Africa.

Retail Africa is expected to be the continent’s largest retailer with an annual turnover of R200 billion, employing 186 000 people. Shoprite will issue new ordinary shares to Steinhoff that will give what is one of the world’s biggest furniture retailers a significant stake in Shoprite.

The deal will result in Shoprite acquiring Steinhoff’s clothing chains, which include Pep, Ackermans, Shoe City and Tekkie Town in exchange for shares. Shoprite will also buy the furniture and appliance retailers that Steinhoff owns via JD Group. These include Russells, Bradlows, Rochester, Incredible Connection, Hi-fi Corporation and Sleepmasters.

The enlarged business might ultimately come under Steinhoff’s control through a share swop, the companies said in December. Talks between the companies were initiated and facilitated by their two biggest shareholders - Wiese and South Africa’s state-owned Public Investment Corporation, which manages state pensions - the retailers said

The companies noted the merger was supported by the two largest shareholders of both companies, the PIC and Titan Premier Investments Proprietary, a company controlled by a family trust of Christo Wiese.

Wiese, South Africa’s third-richest person with a net worth of $6.3 billion (R85.80 billion), is the biggest shareholder in both Shoprite and Steinhoff. He holds 16 percent of Shoprite and 18 percent of Steinhoff. If the companies finally merge it would pull together his retail assets under one roof following Steinhoff’s acquisition in 2014 for nearly $6 billion of Wiese’s budget clothing retailer Pepkor, creating a global giant worth around R400 billion.

Wiese had said the merger between the companies had been on the table since 2006. However, the rumours got louder last September.

The companies said the value for Steinhoff Africa Retail would be negotiated, taking into account the best interests of both Steinhoff and Shoprite shareholders.

The proposed transaction is expected to position the combined businesses of Retail Africa as the leading multi-format discount retailer on the African continent.

The announcement comes just one month after Shoprite’s founder and long-time chief executive, Whitey Basson, said he would retire, leading Wiese to say the retailer was at a “crossroads”.

Retail Africa, locally bred, will have the required size and scale to compete with any other international retailer.

Shoprite and Steinhoff, which has increasingly been expanding in Europe, said shareholders should be cautious as the deal, if concluded, could have a material effect on the share price.

BUSINESS REPORT ONLINE